Thursday, February 9, 2017

Peter Schiff : first of all when it comes to you know
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explaining the fed a lot of people are
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already criticizing job Donald Trump's
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critique because they say well on the
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one hand he says the economy is weak but
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then he says the Fed should raise raids
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and then the one had he says that if we
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raise raise a lot of bad things are
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going to happen but then he criticizes
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the Fed for keeping rates low so which
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is it right he's trying to have trying
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to have his cake and Andy to what Trump
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has to explain is that low interest
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rates don't help the economy low
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interest rates are one of the biggest
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headwinds for the economy because all
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they do is inflate asset bubbles and
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prevent legitimate economic growth and
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Donald Trump has to explain that even
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though the rates have to go up that when
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they do it's going to burst the bubble
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and it's not going to be fun
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it's going to be another financial
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crisis only words but the problem is if
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we're ever going to have a real recovery
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that's going to produce a higher
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standard of living and the good paying
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jobs that everybody claims they want
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we're not going to get there unless we
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let this bubble deflate and that means
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raising interest rates and having to
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live with the consequences which are
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going to be a collapsing stock market a
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collapsing bond market of collapsing
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real estate market failing banks a
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repeat of the OS financial crisis only
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worse and all Janet Yellen is succeeding
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in doing by keeping rates artificially
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low is exacerbating the problem and
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delaying the day of reckoning if you
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remember with so many people worried
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about when it came to bank failures we
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would have had that had the Federal
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Reserve not veiled everybody out as we
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not add the quantitative easing and we
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not had zero percent interest rates so
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the next time around we're going to have
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to deal with the full consequences of
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the mistakes that have been made in the
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past but these mistakes are consequence
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of the said keeping interest rates
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artificially low because they've done
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that we have much too much debt with
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Donald Trump pointed out that under
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Barack Obama the national debt double
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but he didn't point out that it also
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doubled under George Bush and the reason
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it doubled under both presidents is
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because the Fed made it all possible but
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the Fed let everybody lever up not only
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the government but households
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corporations we've all borrowed money
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that is impossible to repay and the only
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thing between us and the crisis is
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interest rates that are practically zero
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but they can't stay there indefinitely
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without destroying the dollar and I
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think ultimately that might be what
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gives is because they try to keep rates
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low so log because they realize how
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painful the correct the process is going
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to be that they destroy the dollar in
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the process and would ultimately causes
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the federal raise raids is because they
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don't want the dollar to become monopoly
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money they want to make sure it doesn't
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lose all of its value adjust the
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considerable portion of its value and
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reluctantly and and eventually they're
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going to have to raise interest rates
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and not just a little but a lot and then
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this whole house of cards is going to
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come falling down and we're going to
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have to deal with the consequences of
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these mistakes i think it's gonna be
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heavy inflation I hope it's not
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hyperinflation i hope we ultimately get
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the rate ice that we need to prevent
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that from happening but then we're going
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to have the complete collapse and we're
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going to have to deal with these
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problems you know one of the things that
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Donald Trump is backing away from and I
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think you should embrace it is his idea
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that we need to restructure the national
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debt and we absolutely must because it
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is impossible for us to repay the 20
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trillion dollars of Treasury debt in
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fact it's impossible to service the debt
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is interest rates rise to a market level
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certainly if they rise to a high level
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to combat inflation there is no way we
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can honor these commitment and I would
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rather restructure and ask our creditors
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many of them are very wealthy many of
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them are far and many of them are
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foreign government
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why should we have massive tax sites on
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the American middle class so that the
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Chinese can be repaid in full for the
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money they were dumb enough to lend the
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US government so we've got to come to
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terms with the fact that we are broke
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that we've borrowed with more money than
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we can ever repay and in the process we
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have created a phony economy
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we have created a service sector economy
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we have enormous trade deficit and they
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don't result from bad trade deals
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it's not NASA that's the reason we have
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these trade deficits it's the Fed it's
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the artificially low interest rates to
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the fact that we don't have our own
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savings to invest in capital it's
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because of excess regulation and excess
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taxation that Hillary Clinton's promise
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to double down on we need less
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government we need free or market we
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need to produce again but none of that
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is going to be accomplished until we
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raise interest rates and we can't raise
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interest rates without breaking the
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bubble so it's like you know that we can
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have the game without the short-term
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pain but politically speaking nobody has
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the stomach for that pain and so we
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never get the game because we keep
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making the problem worse politicians of
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promised voters something for nothing
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a lot of government workers have been
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promised tension but the taxpayers have
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never been asked to fund the pension and
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neither have the workers and so they're
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empty promises and there's no way they
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can get kept that is the bad news
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so there are two possible scenarios we
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come clean and we tell people that
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they're not going to get everything
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they've been promised or we try to
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pretend that everyone's going to get
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paid and we pay off all the promises
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with worthless money I think it's better
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to be honest and restructure these
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obligations in a way that we can
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actually afford to pay them rather than
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just pretend that we can afford it and
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we print a bunch of money destroy the
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value of the dollar and then everybody
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gets their pension but their pensions
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are worthless because you can't buy
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anything with the money I think you want
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is is going to have a substantial rise
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against the dollar you know you have a
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lot of hedge funds that are short that
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currency and I think they're going to
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lose a lot of money on that trade on
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wine i think some of the same people are
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short the yin and the euro I think those
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currencies are going to rise against the
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dollar as well I think they're all going
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to fall against gold and maybe against
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some other currencies but they're gonna
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rise against the dollar and that has
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serious implications for America you
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know one of the things that nobody seems
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to understand or Trump doesn't even
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point out is that in this
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short run the Chinese have been
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supplying a massive subsidy to the
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American economy in the long run they're
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not doing us any favors but in the short
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run they're making our lives better in
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that they supply us with the consumer
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goods that we need and we want and they
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loan us the money to buy them because we
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have this huge trade deficit with china
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that means we're getting a lot of stuff
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from the Chinese that we're not paying
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for so we get all sorts of products that
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make our lives better and they just get
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little pieces of paper that they can't
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do very much with and in fact more
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recently they've been waking up if you
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look at what's been happening to chinese
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holdings of us treasuries they've been
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going down while Chinese holdings of
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gold have been going way up so they can
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obviously read the writing on the wall
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even if we can't but eventually you know
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in the the idea of being careful what
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you wish for
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when we talk about hey we need to look
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kinda has to stop manipulating its
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currency I that means the Chinese
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currency goes up and that means our
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standard of living comes crashing down
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because now all the products that we've
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been buying so cheaply at walmart all
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the sudden a triple in price and nobody
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can afford them
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so this is going to be a rude awakening
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for the average american when he finds
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out just how broke he really is
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prices are going to go way up I mean
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eventually going to walmart is gonna be
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like going to neiman marcus i mean the
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prices are going to be very very high
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and and that means walmart is not going
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to sell as many products in America
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which also means they're not going to
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have to employ as many Americans and so
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it's gonna be a lot of layoffs but in
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the meantime the products that China
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used to ship to walmart in America those
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products are still going to be made
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they're just going to be on a shelf in
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some Chinese walmart and now the Chinese
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people are going to get the byproducts
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that before they didn't have because
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Americans were buying them because
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Americans were richer but when the night
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when the US dollar crashes and their
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currency goes up the Chinese gain the
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purchasing power that we lose
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look there are a lot of problems in the
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financial sector not just deutsche bank
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and Deutsche Bank
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I only have the normal problems but you
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have the US government trying to find
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out what 13 14 billion dollars or
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something like that but i have avoided
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the financials for years that's one of
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the reasons that the funds that I manage
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the mutual funds that are separately
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managed accounts are so outperforming
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the benchmarks this year is because the
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benchmarks have a lot of financial and
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we have none and you know what
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really yeah i think is crazy is you see
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all these animal is talking about how
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higher interest rates are going to be
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good for the banks right because they're
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going to have better margins on their
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loans so we want to see these spreads go
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up these analysts have no clue what
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they're talking about because the banks
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have these toxic balance sheet and
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higher interest rates are going to be
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like a bomb that's going to go off
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because when rates go up the value of
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their portfolios going to collapse
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you've got banks that own the long-dated
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ask that and the collateral for their
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loans is going to lose value and rates
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go up real estate prices are going to
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come down there is going to be all sorts
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of problems that the banks are going to
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be confronted with when interest rates